Illinois holds its first back-to-school sales tax holiday

O'FALLON, Ill. -- Beth Chavarria normally would have bought school stuff for her kindergarten-bound twins a week ago, but instead she waited until Friday's start of Illinois' first-ever waiving of the sales tax on such supplies.

The 36-year-old mother plunked down $90 at her local Walmart on everything from 30 glue sticks to scissors and notebooks, embracing the state's inaugural 10-day "holiday" on sales taxes on certain back-to-school items.

"I think it's a good idea," she said of the tax break after her shopping outing.

Not everyone feels the same. Illinois' tax holiday comes as the cash-strapped state grapples with a $13 billion budget gap, which is among the nation's heftiest. Detractors say it's a less-than-ideal time to part with any revenue.

Illinois families tend to spend $800 million to $1.2 billion on back-to-school items, meaning the state stands to lose as much as $60 million in sales tax revenue, according to the state's Department of Revenue.

"Here we are, broke as anybody outside of California. This might be a novel idea, but, gee, maybe we could pay our bills" first, said state Rep. Bill Black, a Danville Republican who considers the waived taxes an election-year bid by the legislature's Democratic majority to pander for votes.

"If they want to line everybody up and hook us up to some electronic truth detector, I don't know if any legislator could say the state can afford to do this," Black said. "Anyone who says yes, the truth detector would melt."

Backers of the measure figured Illinois had little choice, saying they believe similar tax breaks in bordering Iowa and Missouri lured away Illinoisans' back-to-school dollars.

Illinois is among some 20 states with some sort of sales-tax holiday, with Massachusetts joining the fold just Wednesday. Illinois' sales-tax reprieve runs 10 days while the period in Missouri -- and many of the other states -- only lasts a weekend, in Missouri's case through Sunday. By offering the break longer, Illinois hopes to draw in out-of-state shoppers, siphoning tax revenue from its neighbors.

"This is an idea of economic stimulus as well as helping families," Gov. Pat Quinn, a Democrat, said Friday during a staged visit to a Sears store in downtown Chicago. "This is a way to give our economy a shot in the arm," with the 5 percent savings "going to help a lot of people figure out, hey, it's time to shop."

It's unquestionably an important time for retailers, given that back-to-school shopping ranks second only to year-end holiday spending. Surveys for the National Retail Federation found that a U.S. family, on average, is expected to shell out $606.40 on clothes, shoes, supplies and electronics this year, up from $548.72 last year and $594.24 in 2008.

Deciding the tax break proved tough for state Sen. Dave Luechtefeld, an Okawville Republican who warily voted for it, admitting that "I have mixed feelings about just how much good it does." He conceded the measure costs the state valuable revenue and was uncertain whether it fans consumer spending.

Others simply brand the break a gimmick. A study by the nonpartisan, not-for-profit Tax Foundation -- an advocate for simplicity, transparency and broad-based low rates in state and federal taxes -- found that such reprieves cost states revenue at a time many are in dire fiscal straits, and that tax holidays define and compress buying times rather than generate new sales.

Claims that the tax breaks boost sales and bolster business is "mostly just an illusion," said Mark Robyn, an economist for the foundation. He said the holidays complicate tax collections, distort individual buying decisions and reflect government meddling in the market.

"It benefits individuals who are in the market for things like clothing and school supplies," he said. "Why is a family with schoolchildren deserving of a tax cut and not an elderly couple who aren't shopping for school supplies but maybe needs other things?"

At the Sears store the governor visited, Glenview's Leslie Howell -- mother of 10-year-old triplets and a high school-bound daughter, 14 -- called the sales-tax reprieve "a nice boon for the city." And she liked that it lasted 10 days, giving her enough time to buy a new wardrobe her brood, all of which she said had grown over the past year.

"It would be hard for me to shop for all four in one day," she said.